The table below shows the demand and supply of coats in Small Town.

a. What is the equilibrium price of coats? Will a shortage or surplus of coats occur?

b. At what price will the most coats be sold?

c. The mayor of Small Town, in order to “help the poor by making coats cheaper,” imposes a price ceiling of $40. How many coats will be bought and sold? Will a surplus or shortage of coats occur?

d. The mayor of Small Town, in order to “help protect our coat industry,” imposes a price floor of $80 instead. How many coats will be bought and sold? Will a shortage or surplus of coats occur?

Transcribed Image Text:

$80 $70 $60 $50 $40 Price 50 60 70 Quantity of Coats Demanded (per day) 80 90 Quantity of Coats Supplied (per day) 110 90 70 50 30